Controversy which has engulfed the Office of the President of the Republic of Estonia in relation to funding and requested top-up funds for this year is now in its second week.
ERR was able to obtain an email exchange between two key figures in the saga, namely the head of the president's office, Peep Jahilo, and the Minister of Finance Mart Võrklaev (Reform), in the interests of shedding light on what had gone on.
An abridged version of the exchange follows.
Email From Peep Jahilo to Mart Võrklaev, dated 2.16 p.m. Monday, May 15, 2023.
Jahilo says the president's office is "forced" to request an additional €360,000 on top of the budget for 2023 as set out in the state budget, which passed at the end of the preceding year.
These requested funds would "cover the expenses incurred by the President of the Republic's international relations communications."
One state visit takes up about a quarter of the existing budget as set aside for that purpose, Jahilo notes, citing the importance of international relations both in the context of Russia's invasion of Ukraine, and of business ties in relation to Estonian exports.
When the state budget was drafted last year, the state visit by King Carl XVI Gustaf and Queen Silvia which went ahead in May, and Patriarch Bartholomew I of Constantinople, which has not gone ahead, were not known about.
The office had to request top-up funds last year from the government reserve, also, which were received, Jahilo noted, expressing gratitude that these were forthcoming
The president being able to disburse his duties as required in the second half was now "in serious doubt," he added.
The email apparently went unanswered since Peep Jahilo sent a follow-up, almost a month later.
Note that this email came after an alleged conversation between the president's internal adviser and the secretary general of Võrklaev's ministry, in which the former is alleged to have jokingly referred to a quid pro quo arrangement whereby, if the requested funds were forthcoming, a backlog of legislation could be cleared in terms of a speeded up presidential assent to each law.
Second email From Peep Jahilo to Mart Võrklaev, dated 3.48 p.m, Tuesday, June 13.
In his second email, Jahilo wrote that he " understands that resolving this kind of issue is in your (ie. Minister Võrklaev's – ed.) hands."
Jahilo noted that he had mentioned the shortfall in the previous email, "which I hope reached you."
"We are talking about the performance of the functions of the President of the Republic," he added.
Jahilo reiterated the security aspect of the importance of high-level visits, in particular outside of NATO and the EU; one of these visits should take place in the second half of this year, he added (this may refer to a now-postponed official visit to Australia – ed.).
"The Office of the President understands the importance of this part of Estonia's foreign policy, and the head of state is ready to participate in every way, but the office lacks the budgetary means to fulfill this role," he added.
The hit taken by the Swedish royal visit in May this year had already meant that proposed visits to Estonia from foreign heads of state were having to be rejected, he added, reiterating the request for additional funding and a desire that the matter could be resolved in a manner amenable to all parties.
The next day, Minister Võrklaev responded to Peep Jahilo in respect of the two above emails.
Email from Mart Võrklaev, sent 8.46 a.m. on Wednesday, June 14, 2023.
The minister apologized for the delay in response, which he put down to a busy schedule.
He also rejected the application for the additional funding as requested by the president's office, writing: "While I value the highly President of the Republic' foreign relations, at the moment I do not see any viability of allocating additional funds from the reserve for this purpose, in the current situation, in addition to those funds already allocated from the 2023 budget and from the reserve."
"According to the rules (link in Estonian), the Government of the Republic is allocated funds from the reserve for unforeseen expenses which could not be anticipated during the preparation or processing of the state budget," Võrklaev went on.
He then outlined in detail the budget deficit which the government has seen build up in recent years, both due to crises and other, mostly fixed costs, as well as the need to up defense spend to at least 3 percent of GDP, thanks to Russia's invasion of Ukraine.
"Thus, the state's expenses have increased significantly, yet we have not increased revenues at the same time," Võrklaev said.
"In order to put the state's finances in order and cope with its state's obligations, the government coalition created in the spring has set its goal to move towards budget balance, first by ensuring a budget deficit of a maximum of 3 percent of GDP in the next four years. To achieve the goal, we consider it necessary to both increase revenues and find savings," the minister went on.
Ways to find savings included ministries being required to reduce operating expenses by 4.2 percent 2022-2023, and by an additional 1.3 percent in 2024 – a policy put in place by a previous administration but which remained valid and applied to all ministries.
Furthermore there would be no additional costs incurred for 2023, across the board, the minister added, with the only exceptions being those resulting from legislation and other measures passed and agreed by the current Reform-Eesti 200-SDE coalition.
Thus the four tax-related bills aimed at changing and hiking income tax, VAT, excise duties and gambling tax, in the interests of bringing in an extra €200 million to the state budget per annum.
Furthermore, the minister noted, the president's office had last year been granted an extra €120,000 from the government reserve intended to cover additional visits and their expenses, as they related to Russia's full-scale invasion of Ukraine, along with €127,000 towards IT costs, and €23,352 relating to remote working solutions – again coming from the government reserve.
"In total, an additional €270,352 was allocated to the government's office in 2022," the minister noted.
On top of that, the an additional €160,226 was allocated this year towards IT costs – initially misquoted at €60,226, ie. with the missing '1' at the beginning.
During the preparation of the 2023 state budget (in fall last year), despite the trying times the government, Võrklaev wrote, found additional funding sources for the president's office totaling €304,903, a rise of nearly 7 percent on the preceding year.
The president's office payroll costs rose by €283,310, or 14 percent, this year; and operating expenses by €130,800, or 7.5, Võrklaev stated.
As for 2024, the minister aid he has sent a letter outlining the budget process to all ministries, and will do so to all constitutional institutions – ie. including the president's office – in the coming days.
The process of reaching budget balance in conjunction with ministries and state institutions and agencies will take place in increments over four years, with goals of finding savings and reorganizations year-on-year, in order to render the Estonian state more efficient, Võrklaev added.
"I hope that we all understand that the ratio of our state's expenses to its revenues must be in order, and we will be working hard to ensure that we can keep the economic environment competitive, and public finances sustainable," Võrklaev went on.
Five days later Peep Jahilo responded to this email from the finance minister, thanking him for his thorough response.
Email from Peep Jahilo to Mart Võrklaev, sent at 11.33 a.m. on Monday, June 19, 2023.
"I am also conveying the urgent desire of the President of the Republic to find a compromise on this issue," he went on.
"You can rest assured that I would not be contacting you with a request to use the reserve in the absence of an urgent need to do so," Jahilo added.
"Both the president and his office are very familiar with the government's fiscal policy, but this should not curb the head of state's ability to act," he went on.
Jahilo also outlined what he said were inaccuracies in Võrklaev's email of June 14, noting that of the sums the office has received, on ly €60,000 pertain to the rise in administrative costs this year, really referring to visits, marking Independence Day and the Restorration of Independence Day, and other events.
The hole in the budget incurred by the King and Queen of Sweden's visit comes to €120,000, he added, which "in turn, has had an extremely noticeable effect on the ability of the president to disburse his duties."
"In addition to foreign visits that need to be canceled, we must also consider canceling other traditional presidential activities. Neither one nor the other contributes to the achievement of all of our broader goals," he went on.
The increase granted last year related to Russia's invasion of Ukraine and the changed security situation, he noted.
This situation remains the same in 2023 as it was in 2022, Jahilo wrote.
"Ukraine continues to need our support and hence the continued need for various foreign visits," he added, alongside the need to boost Estonian exports via the business delegations that accompany the president on his official visits.
At this point, the email trail dried up, since Jahilo furnished Võrklaev with his mobile number, which the latter duly called on June 21, to further clarify the situation, ERR reports.
Editor: Andrew Whyte, Urmet Kook